Mmm, Spam.
Or rather, mmm, SPAM (TM). Hormel (NYSE: HRL ) , that turkey and pork processor extraordinaire, isn't just the maker of bacon bits and Dinty Moore stew; its most famous meat product has also given modern culture a name for the much-maligned advertisements that pack themselves into our email inboxes. Hormel reports its fourth-quarter and full fiscal year 2005 earnings tomorrow morning, and analysts' mouths are already watering.
They expect to see the company announce $0.57 per share in profits for the quarter, a 14% year-over-year increase, on a 12% jump in sales. For the fiscal year, analysts predict $1.80 per share on $5.45 billion in sales -- a 15% increase in profits and a 14% increase in sales. Not bad for a food company.
But as good as those results already look, it's entirely possible that Hormel will serve us an upside surprise. Two weeks ago, Hormel raised its earnings guidance for tomorrow's results, suggesting that it would post profits per diluted share between $0.56 and $0.59 -- significantly higher than its previous guidance of $0.50 to $0.56. That revision had analysts scrambling to update their projections this month, raising them by an average of $0.04 from previous estimates of $0.53. (What are analysts good for, again, if they're only going to parrot what the company's already told us?)
Hormel credited the raised guidance to "exceptional market conditions and good growth," resulting in "better-than-expected" results from its Jennie-O Turkey Store business. Hormel's Grocery Products unit was also notably strong. Both of those observations suggest that Hormel will announce better-than-expected sales results along with tomorrow's raised earnings numbers.
With so much of Hormel's news no longer, well, news, what should a Fool focus on tomorrow? Margins, for one thing. As fellow Fool Stephen Simpson observed back in August, they declined in Q3. With all the "exceptionals," "goods," and "betters" that Hormel was throwing around earlier this month, we'll want to confirm that there's still an "improving" left in the bag to describe the company's margins.
Investors should also keep an eye on stock options. Hormel hardly ever dilutes outside shareholders; its share count has risen barely half of one percent over the past three years. We'll want to confirm that this shareholder-friendly trend continues.
Other than that, and the company's forecasts for fiscal year 2006, I suspect that Hormel shareholders will be able to just sit back and savor the results.
Further 100% natural Foolishness:
Fool contributor Rich Smith does not own shares of Hormel.
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